Australia's services sector still shrinking despite rate cuts

MARK COLVIN: David Taylor joins me now for the rest of today's business and finance.

Some more less-than-satisfactory economic data today out of both Australia and China.

DAVID TAYLOR: Mark, data show Australia's services sector is still shrinking but at a slower pace. The performance of services index from the Australian Industry Group and the Commonwealth Bank rose 3.1 per cent to 48.5 in February. Now, a number below 50 indicates the contraction remains.

The industry group says that recent interest rate cuts are helping but that more are definitely needed. Over to China now and China's services sector expanded but at a slower pace.

So you've got Australia's services sector shrinking at a slower pace and China's services sector is expanding at a slower pace. Those figures were for February.

The index released by HSBC declined to 52.1. Again, a figure above 50 this time indicates expansion. The Chinese economists though are blaming the dip on the Chinese New Year.

MARK COLVIN: And how did the share market react to those better-than-expected retail figures that we heard about earlier?

DAVID TAYLOR: Yeah, well they pushed up because the figures were much better than expected. If I can go through a few retail stocks, Mark.

David Jones up 3.5 per cent to levels not seen for a little while. Harvey Norman up over 2 per cent and Woolworths up over 3 per cent to $35.15.

Now, the retailers weren't the only stocks that led the market higher.

The banks also performed well. Most of the major retail banks did quite well and all of that combined to push the All-Ordinaries up 59 points, or just a little over 1 per cent, to 5,088.

And the Australian dollar also, look it's been bouncing around a little bit, yesterday it fell below 102 US cents actually, it was about bouncing just around about 101 US cents. That's a level we haven't seen in quite some time too. But again, those better-than-expected retail sales data lifted the dollar this afternoon.

And also Mark, the expectations of a rate cut sort of subsiding in the next couple of months also saw the dollar move higher. It's trading at 102.3 US cents.